Portuguese Tax Authority (PTA) has announced that both cryptocurrency trading and payments in crypto are exempt from VAT (Value Added Tax) in the country. There is also no income tax on crypto earnings in the country according to the authority (provided that the sale is not performed in the context of a business activity). In a recent tax clarification provided to a local cryptocurrency mining company and published in a local newspaper as well, the tax agency clarified that the exchange of crypto for fiat money is free of VAT and that crypto users do not have to pay any income tax.
In the official statement, the Portuguese tax authority cited a 2015 ruling by the European Court of Justice regarding the case involving major Swedish Bitcoin (BTC) portal Bitcoin.se and its moderator David Hedqvist. As reported at the time, the court ordered that Bitcoin is a means of payment and that the exchange should therefore be exempted VAT obligations. (However, the Swedish Tax Agency subsequently argued against the ruling, claiming that the court did not fully understand the matter.)
The PTA has already deliberated on income taxation of the sale and purchase of cryptocurrencies in a previous tax ruling in 2015. According to this ruling, the Portuguese personal income taxation regime did not apply to the income derived from the sale of cryptocurrency, as no income category covers cryptocurrency gains, provided that the sale is not performed in the context of a business activity. Thus, there was no legal basis in Portugal for income taxation of cryptocurrency gains in those circumstances. However, as opposed to consumption taxation, income taxation is not harmonized at the European Union level. Consequently, the views adopted by the PTA regarding income taxation and cryptocurrencies have primarily only a domestic impact, but at the same time this decision might cause talented people to move from countries that try to ban cryptocurrencies to Portugal.